McKinsey's African Subsidiary to Pay Over $122M to Settle FCPA Charges
McKinsey and Co. Africa, a subsidiary of consulting giant McKinsey, will pay over $122 million to settle an investigation that found the company violated the Foreign Corrupt Practices Act by paying bribes to South African government officials from 2012 to 2016, DOJ announced. A former McKinsey senior partner, Vikas Sagar, pleaded guilty to his role in the scheme.
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McKinsey said in a statement that it's "deeply remorseful that an employee" of the firm "engaged in corrupt conduct," adding that it has a "zero tolerance policy for employees who do not strictly adhere to the company's compliance policies, procedures, and professional standards."
The McKinsey subsidiary entered into a three-year deferred prosecution agreement with DOJ, agreeing to pay the criminal penalty and to continue cooperating with DOJ's Fraud Section and the U.S. Attorney's Office for the Southern District of New York in any "ongoing or future criminal investigation arising during the term of the DPA." Both McKinsey and McKinsey Africa agreed to improve their compliance program and report to the U.S. regarding "remediation and implementation" of the enhanced program.
Under the scheme, McKinsey Africa, through a senior partner, agreed to pay bribes to officials at Transnet SOC, South Africa's state-owned and state-run custodian of ports, rails and pipelines, and at Eskom Holdings SOC, the nation's state-owned and -run energy firm, DOJ said. In return, the consultancy obtained nonpublic information from the companies regarding the "award of lucrative consulting contracts and submitted proposals for multimillion-dollar consulting engagements."
DOJ said McKinsey and McKinsey Africa earned around $85 million in profits from the scheme.
The agency said McKinsey Africa got credit for its assistance with DOJ's investigation, which included cooperating with the investigation, making various factual presentations to DOJ, producing "voluminous records," reporting the discovery of "document-deletion efforts" by one of the company's employees and reporting newly discovered information in real time. The company also traced "complex internal accounting money-flows and currency-exchange information," hired a "third-party forensics consultant to analyze key electronic devices," produced its employee's personal email and bank account information, engaged with DOJ regarding a "deconfliction request" and made company officers available for interviews.
DOJ also gave a nod to McKinsey Africa's "timely remedial measures," which included putting an employee on leave after it learned of their role in the scheme, then firing them after discovering they deleted emails. Other remedial measures included anti-corruption training for its African employees, temporarily halting all work with state-owned entities, boosting due diligence efforts, imposing a "more rigorous risk-review for public sector clients" and paying back "all revenues" received from "potentially tainted contracts."
The result of McKinsey's efforts led to a "35% reduction off the fifth percentile" of the fine, DOJ said.